Inside Washington, Part One

Recently I had a chance to speak with Brian Chappelle from his office in Washington, D.C. Brian is a partner in the company Potomac Partners, LLC, a consulting group to the mortgage industry that works closely with lawmakers in Washington. To say Brian has his finger firmly on the pulse of whatâ€™s happening with the recovery plan is an understatement. Heâ€™s knee deep in it. This week and next week Iâ€™m giving you a down and dirty replay of our conversation. Itâ€™ll be tough to do it justice, though, as Chappelle has enough inside information to fill this column for several months.

First topic up: The goals of the current administration. Chappelle stated these goals are clear. There are basically two strategies. First, increase demand for housing with the stimulus package. Secondly, slow down or stem the tide of foreclosures. Both strategies are more easily explained than executed. I asked Brian if he thought the White House and lawmakers were on the right track with these plans and he stopped short of agreeing, but rather said he was â€œoptimistic.â€

I, on the other hand, think the stimulus package may help the economy in the short term, meaning this year, but alone will fall far short of long-term recovery. Why? Because foreclosures have the ability to nullify the entire stimulus effect, a point Chappelle and I both agree on. Reducing foreclosures is a necessity.

We can and we will debate the best way to cut foreclosures. You may think the White House is crazy with the plan to help people renegotiate their loans, but let me just say this: Something has to be done. From economist estimates, weâ€™re facing four to eight million more foreclosures in the next four to six years. If those estimates come true, all our homes will be at risk of losing significantly more value across all market price points.

Be here next week when weâ€™ll discuss interest rates and government intervention.